American Eagle Outfitters (AEO): An Early Earnings Look

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American Eagle Outfitters (NYSE:AEO) has done a good job of keeping itself healthy from a financial standpoint, with strong operating margins. In this dog-eat-dog corner of the retail world, what benefits one company usually comes at the expense of another, and rival Aeropostale, Inc. (NYSE:ARO) has been on the short end of the stick in teen retail lately, as analysts have argued that shoppers with limited money to spend used it at American Eagle and Abercrombie & Fitch instead.

But American Eagle’s same-store sales have slowed down substantially in recent months, with figures of 5% for the quarter through the beginning of January representing a haircut of more than half from the year-ago quarter and 5 percentage points sequentially. That has gotten the company to work on remodeling stores with good sales and closing ones that have bad sales, as well as working on streamlining inventory delivery on products that look particularly promising.

To grow, American Eagle is looking for ways to expand its coverage to grab new market segments. For instance, the retailer has ramped up its Aerie women’s intimates line, and although Limited Brands, Inc. (NYSE:LTD) Victoria’s Secret has a commanding lead in the space, there’s plenty of room for American Eagle to claim at least some market share in the lucrative niche. Moreover, American Eagle is boosting its international presence, having opened stores in Mexico and the Philippines and taking over six Chinese stores all within the first two months of 2013.

In American Eagle’s report, watch for information about how its overseas forays are doing, while still keeping an eye on final data on the holiday season. Unfortunately, in this space, a company that does well one year can do horribly the next simply by making a fashion mistake, so to invest in this industry, you’ll need to keep paying attention to American Eagle and its peers as the spring season ramps up.

The article American Eagle Outfitters: An Early Earnings Look originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool owns shares of Aeropostale.

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